Thursday, October 09, 2008

How Were They To Know?

We're all in the sulphur soup now

We've already blogged the fiasco of local councils losing gzillions of council tax money in busted Icelandic banks. Including police authorities and Transport for London, the total has already raced above £750m.

So of course they're now whining that central government should bail them out. "How were we to know?" they wail. "These banks were all top rated and we had no reason to think they might fall over. Perrleeesssee daddy, give us our money back."

It's pathetic.

Item 1: The excellent video above is a TV report by ex-broker Max Keiser dating from 5 August 2007 - ie before the interbank markets even started locking up. It wonderfully highlights just how lunatic the Icelandic banks were (HTP EC Forster).

Credit insurance for debts at Iceland's biggest bank, Landsbanki, is priced at 610 points while that for Kaupthing is priced at a hair-raising 856. Given that these two have taken billions in UK retail deposits, it may be a sobering thought for savers to consider where they are putting their cash. These banks are now seen as the most unsafe in the developed world.

Of course, no one can be sure that disaster looms for anyone, but the figures on credit default swaps show clearly where investment professionals think the big risks are.

You have been warned."

So WTFFFF did the councils carry on as if nothing was wrong?

Especially since by February-April this year, even the conflicted way-behind-the-curve discredited credit rating agencies were formally downrating Icelandic banks (eg see here).

So tonight, as you listen to the squawks and special pleading from these incompetent town hall bureaucrats, just remember the truth.

BOM the book now available

Drawing on six years of blogging government waste, this book shows how we spend far more than we need on our public services. It sets out the facts and explores the underlying issues. Just why does government spend so much and deliver such second rate service? Why do we put up with it? And what are the alternatives?

ABOUT BOM

Despite all the talk of cuts, government still consumes nearly half our national income. Yet many tens of billions of its spending is wasted, with taxpayers made to pick up the tab for a depressing array of overpriced sub-standard services. This is money we can no longer afford, and our National Debt is already at danger level.

If we're to avoid further decades of stagnation and austerity we urgently need to find another way. Exposing and understanding the wastefulness of government is a necessary step in the right direction.